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NeighborCare says new bid by Omnicare is still too low


In the continuing takeover battle for NeighborCare Inc., the Baltimore institutional pharmacy rejected yesterday the new offer from its larger rival, saying the $32-a-share bid was still too low.

NeighborCare had promised to consider the offer from Omnicare Inc. on June 16, the same day it was made. Valuing the company at about $1.7 billion, it was $2 a share more than Omnicare's initial proposal in April 2004, which has been repeatedly rejected. "The revised offer is inadequate and does not provide NeighborCare shareholders with the value they deserve," NeighborCare said in a statement yesterday.

The rejection of the $32 offer was consistent with analysts' predictions that the company could attract a higher price.

Jerry L. Doctrow, an analyst at Legg Mason Wood Walker, wrote in a research note Friday that the market had driven up the price of both companies. Investors now believe, "Omnicare will be able to achieve $120 million in synergies and may purchase NeighborCare for $34 per share," he wrote.

NeighborCare sounded a similar note yesterday. "In light of the synergies that would be created and the benefits to Omnicare of a combination of these two companies, Omnicare is able to pay significantly in excess of the revised offer price," NeighborCare said in a press statement.

In an accompanying SEC filing, the company amplified that view, saying its financial adviser, Goldman, Sachs & Co., "rendered to the board its oral opinion to the effect that, as of June 24, 2005, the revised offer was inadequate."

Because its customer base had increased 17 percent and it had successfully cut its costs, NeighborCare argued that it was worth more than in April 2004, when it rejected Omnicare's initial $30 bid.

Since the new $32 offer, NeighborCare shares have traded between $33 and $34, suggesting the company is worth more. NeighborCare's shares closed yesterday at $33.47, up 19 cents. Omnicare shares closed at $40.84, down 81 cents.

Joel F. Germunder, Omnicare's president and chief executive officer, said the No. 1 institutional pharmacy was "disappointed" by the rejection:

"We continue to believe that our offer provides compelling value to both NeighborCare and Omnicare shareholders."

Omnicare, with headquarters in Covington, Ky., controls about one-third of the institutional pharmacy market, filling prescriptions for residents of nursing homes and other facilities. Omnicare has contracts to serve more than 1 million beds.

Known as a persistent and aggressive acquirer, it first tried to buy NeighborCare in April last year but a long federal antitrust review of the merger delayed any progress toward a resolution. Omnicare sweetened its bid June 16, the same day the Federal Trade Commission said it would have no objections to a merger.

NeighborCare is the second- or third-largest institutional pharmacy, depending on the measurement, serving nearly 300,000 beds, up from 255,000 last year.

NeighborCare began as a retail pharmacy in Baltimore in 1980. Over time, it began to concentrate on the institutional pharmacy business, although it still has about 30 retail stores, most in the Baltimore area. It was acquired in 1996 by Genesis Health Ventures Inc., a nursing home chain with headquarters in Pennsylvania, but was spun off as a separate Baltimore company on Dec. 1, 2003.

NeighborCare has about 6,000 employees nationally, including about 500 headquarters employees near the Inner Harbor.

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